Well, there's two announcements today and I'm joined by the Commissioner of Taxation. I very much appreciate all the work he’s put into these different announcements. Firstly, today I introduced the multinational anti-avoidance laws into the Parliament. Australia is leading the world in cracking down on multinationals that are not paying their fair share of tax. After having discussed this legislation at the G20 last year, and also having announced it in the Budget, I followed up at the G20 in Ankara two weekends ago and came to an agreement with the Chancellor of the Exchequer, and notified the G20 that Australia was going to introduce this legislation which is the toughest in the world against those companies not paying their fair share of tax. As a result, after the Taxation Office, being embedded in 30 companies, the laws will apply to over 1,000 multinationals operating in Australia that have a global turnover of more than a billion dollars. I understand a number of multinationals have already come forward to identify profits previously unseen in relation to their activities in Australia, and are prepared to restructure their businesses to pay their fair share of tax in Australia. Secondly, the crack down of the Coalition Government in relation to foreign investment continues. I can advise you that, as of today, there are now over 500 investigations into over one billion dollars of residential real estate that may be held unlawfully by foreign nationals in Australia. We have already announced seven divestments in relation to property. I can announce today that I have signed for the further divestment of property, including properties in Labrador, Queensland, Ardross in Western Australia, Elizabeth Bay in Sydney, Underdale in South Australia and Stretton in Queensland -held by people from Singapore, Indonesia, the United Kingdom and China. The lowest value purchase price was $265,000, the highest $8.1 million. They have 12 months to sell the properties under the amnesty that we have provided until the end of November. So we are getting on with the job of enforcing the laws. There has been no enforcement and no successful order for at least the last 20 years. But we have taken this decision to ensure that there is integrity in the foreign investment regime and that those people who unlawfully hold Australian residential real estate are caught. I reaffirm again, that we now have investigations into people unlawfully holding residential real estate, 500 investigations for properties in excess of a billion dollars in value, and we will continue to police the laws. And with the increased power associated with the laws currently before the House of Representatives we are absolutely confident that Australians can once again have faith that the foreign investment rules are being complied with. Commissioner.

COMMISSIONER:

Thank you Treasurer. Firstly, on the multinational anti- avoidance legislation, the Tax Office very much welcomes the introduction of this legislation which will significantly impact and encourage large multinational entities to book their sales here in Australia from sales that clearly have arisen from sales activity here in Australia. The new laws will make it a lot easier for the ATO to bring to account, to drag back into the Australian tax net, that sort of activity, that clear economic activity resulting in sales that is presently booked somewhere overseas, typically in low or no taxing jurisdictions where the profits are ultimately diverted to. We have a lower standard, the existing anti-avoidance laws require the sole or dominant purpose test. Over the years that's been [inaudible] down somewhat by the courts and was a very difficult test for us to meet. We now have the test of one of the principal purposes, that’s in line with the OECD equivalents in anti-abuse of treaties, and it will make it, that lower test threshold, will make it a lot easier to bring to account, back into Australia, the profits that are clearly being diverted out of Australia. Importantly, this arises from any tax benefits that arise after 1 January 2016, not schemes entered into after that time. The Treasurer's made mention - and is absolutely correct - that a number of these large corporates either directly or through their advisers, have approached us to try to get some understanding of the tax implications of unwinding this. I hope we raise no revenue from these new provisions because I hope that these multinational companies will do the right thing, will restructure their investments into Australia in such a way that they leave the profit that clearly arises from this economic activity back here in Australia, and have that subject to our 30 per cent company tax rate.

JOURNALIST:

Commissioner, if they do do that, what kind of…

TREASURER:

Do you want to say something about foreign investment?

COMMISSIONER:

Just on the foreign investment if I could make a couple of comments there. We are working on around those 500 investigations at the present time. The majority of those are community referrals, community dob-ins. So we’re going through those in a fairly systematic way. There are about 50 people already devoted from the ATO in this area. And we are bringing to bear our immense data analytics. When we look at the fees we get from immigration, the fees we get from AUSTRAC, getting information from all the land titles offices, running that against all tax returns; we are seeing examples of very young people who are here on maybe a student visa never having lodged a tax return, yet acquiring properties of say $5 million. This does cause us to have some spin-off benefits by being the Tax Office. We will be looking also - where’s the income if people have these places rented - how come you have not disclosed income? We will be looking closely at where the source of those funds have come from, checking to see whether it's previously untaxed income here in Australia or in the worst case, has it come from the proceeds of crime? We will be taking strong action and a lot of our work now is encouraging people to come forward before the first of December to make use of that concessionary penalty regime up until that time. We will particularly be focusing our attention on third party facilitators. No longer will the accountants, the lawyers, the buyers’ agents, the real estate agents be immune from activity because they will be subject to very strong civil and criminal penalties after 1 December, so I am encouraging them to come forward because we will be focusing our attention there because a lot of these foreign nationals don't understand trusts or these blind trust complex corporate structures that the lawyers are putting them into to hide the real beneficial ownership of these properties. So we will have a lot of specific attention against those third parties who knowingly facilitate the illegal acquisition of Australian real estate.

TREASURER:

Fran?

JOURNALIST:

Commissioner or Treasurer, sorry to interrupt before but, you say you hope you make no revenue from these measures and this new penalty regime, but what about the revenue that will be added to the bottom line by these companies restructuring and doing what they should be doing? What’s that going to add? What are we missing out on?

COMMISSIONER:

We know there are billions of dollars of sales revenue that are not being booked here in Australia. Now that is the gross element. Because of the nature of their point that they're not subject to tax here, we don't have a lot of information around their cost structure. So these aren't the typical transfer pricing ones that book sales here and then back out a lot of the profit by the costs of goods. You would have seen some of that in the Senate inquiries, in some of the companies, and some of the industries. So we know there are billions of dollars. That’s gross. So we have to look at what the profit element of that is and have a much better understanding of their true cost of sales, not some inflated cost of sales with a lot of that going through to tax. So we would expect hundreds of millions of dollars’ worth of revenue at least, but it’s billions of dollars of sales. But you have to make sure you understand the difference between the gross sales figure and the profit figure which is subject to tax.

TREASURER:

As you know, Fran, I deliberately did not put a number on this in the Budget. And why - because you’ve got to go through case by case, identify how much profit they actually legitimately made in Australia and then apply the tax rate. Wayne Swan made the mistake of putting a number on the mining tax then spent it. There was no mining tax revenue as you know. I have always been conservative with the numbers.

JOURNALIST:

Treasurer, so you talk of hundreds of millions of dollars. That’s a drop in the ocean when you look at the overall tax revenue the Commonwealth gets and needs for the future. Is today's activity enough to get enough revenue from multinational profit shifting?

TREASURER:

To get enough revenue. I see every dollar as precious…

JOURNALIST:

Can the Government do anything further than what it's announcing today?

TREASURER:

Well, what we have announced today - there wasn't universal agreement in the G20, particularly from one very large country that was a little upset about it. But I have been running this for two years and we've been running very hard on it. It is patently unfair for a large multinational with sophisticated structures not to pay its fair share of tax when I go to the local book store in Lane Cove Mall and he has to pay tax. I mean it's just patently unfair. So on the two areas - GST on online products - the legislation will be introduced in the next sitting fortnight, I finally got that through the state treasurers and that legislation is going to ensure that anyone that purchases products overseas via the internet from Australia pays GST as they would if they went down to the local shopping centre. The second one is multinationals paying their fair share of tax. Now, in the United Kingdom they introduced an integrity measure that got worldwide headlines. I can't use the commercial name but it was - you know what it is. That tax. We’ve taken a different approach but we have worked closely with the Chancellor of the Exchequer. I had Treasury officials go over to England to discuss the matter with the Treasury over there. It's working. It's working.

COMMISSIONER:

Could I just say, that the Treasurer should be acknowledged for his personal leadership of this issue. The UK did something earlier, and Australia has been the only other country in the G20. So I think we should acknowledge the leadership that the Treasurer has demonstrated by getting this legislation up into the House because it will give us, it will give us, the ATO, significant new powers to drag back into the Australian tax net income from sales where the economic activity is clearly arising.

JOURNALIST:

[Inaudible] There's a lot more revenue leakage going on than just hundreds of millions of dollars. So is something else needed in the future?

COMMISSIONER:

Look, there are all the action items that are coming through later this year to the finance ministers meetings in Turkey, the leaders’ meetings. There will be presumably adoption by the G20 of the 15 action items next year. All countries will be looking at how to adopt that in their domestic legislation. So we will see some very integrated and very, sort of, wide ranging new proposals in the international tax arena that hopefully will provide a greater and easier way to allocate profits of multinationals.

TREASURER:

The first tranche on base erosion and profit shifting happened last year under our leadership and the second tranche is coming before the G20 leaders in Anatole and we discussed them in Turkey. I had a lengthy discussion with Angel Gurria, the Head of the OECD. We're backing that base erosion plan. We've been right at the forefront of advocating for it, but it's not the same as what we are doing on multinationals. We’re going further, but it is not going to be in conflict with what the OECD is doing.

JOURNALIST:

Mr Hockey, can I ask you two questions. What do you think of Malcolm Turnbull's decision to extend Family Tax Benefit B – [inaudible] supposedly trying to cut down on middle class welfare - and can I ask you, do you anticipate being in your role this time next week?

TREASURER:

Well, are there any other questions on tax? No? [laughs]. Okay.

JOURNALIST:

How will the Government be offsetting the $25 million cost [inaudible] - sorry $23.25 million.

TREASURER:

The Tax Office is very well resourced. We’ve given the Tax Office some additional funding support, particularly in relation to Foreign Investment Review Board investigations. As you’d know, the Foreign Investment Review Board was in Treasury. It was poorly resourced. When I came in we made a decision to have significant application fees for foreign investors in relation to the purchase of everything from property to companies. That raised the revenue that exceeded even the funding requirements for us to put it into the Tax Office and make that happen. Okay.

JOURNALIST:

Can I just ask about online purchases - how is that exactly going to work? Is there going to be some obligation for companies to do it, or are you just basically asking them nicely?

TREASURER:

This is the challenge. A number of countries around the world have introduced this equivalent legislation in relation to online purchases. There are companies like Amazon and Facebook and others that are prepared to work with countries, wherever they may be located, to apply consumption taxes should that country request it. That’s because they actually don't pay the tax themselves, it's their customers that pay the tax. So I am absolutely confident and the Commissioner might add that those sort of companies will work with the Tax Office to apply GST to their sales in Australia, because they're doing it in other countries around the world. And that’s because they want to be good, global corporate citizens.

COMMISSIONER:

That’s absolutely right. All the large suppliers do comply with domestic laws. It is more or less on a voluntary basis, but they do wish to be seen to be complying with local laws. Now there's - and that is the vast bulk of sales in terms of percentages - there's a multitude of small suppliers. Let’s wait and see how that turns out. Wait and see the size of that and work out if there are some other measures that might be feasibly introduced to pick up on more of those.

TREASURER:

In relation to the question earlier, I understand there are more details to be worked out in further discussions on Family Tax Benefit. And as for the second question, that is up to the new Prime Minister.

JOURNALIST:

Given the events of Monday, can I just take you back to the beginning of the year. I think it's fair to say that you decided perhaps wisely to keep all options on the table when it came to tax reform. That you indicated, for example, that you supported looking at superannuation again, that was ruled out. It looks like you were supporting a bank deposit tax - that was ruled out again. Now that Tony Abbott is gone, do you think that those two issues should be revisited?

TREASURER:

Well, clearly the Prime Minister’s going to determine his ministry and lay down his policies. The economic directions we’ve taken over the last two years have helped to make the economy $68 billion larger, 300,000 more jobs. There are no apologies for the collective decisions made.

JOURNALIST:

That’s not what I asked. I didn't ask that…

TREASURER:

I know what you asked, and I’m giving you the answer that I choose to give. That’s normal - I don't get to ask your question, you don't get to answer me mine…

JOURNALIST:

Treasurer, would you be willing to serve in another portfolio and given there is now going to be a full cabinet discussion on the effects test can I ask why that hadn't happened beforehand?

TREASURER:

Well James, I’ve had discussions with the Prime Minister. We will leave it at that and see what happens.

JOURNALIST:

Mr Hockey, Malcolm Turnbull had a huge swipe at the economic narrative of the Abbott Government. Are you gutless for not resigning as Treasurer?

JOURNALIST:

Treasurer, apparently details of yesterday’s cabinet meeting have been leaked to Ray Hadley in Sydney. Stuff like the length of the meeting, the apparent mood of the Prime Minister as he sat in it and so forth. Given you were such a steep critic of a lack of loyalty two days ago, how would you characterise the leaking of cabinet details on the first full day of the new Prime Minister’s tenure and can you tell us, give us any idea, as to where you think those details might have come from?

TREASURER:

No.

JOURNALIST:

Would you characterise those for us?

TREASURER:

No, well I haven't seen them…

JOURNALIST:

Treasurer you mentioned you had discussions with the Prime Minister. Has he offered or suggested or floated any other portfolio for you?

TREASURER:

As all of you know, and you see it all, I am instinctively a loyal person. You know that. I see the job that I have as one being loyal to the Australian people. That’s why I am doing my job. It's what I'm here for, to be loyal to the Australian people, to do what is right for them. In relation to Prime Ministers, I have always been loyal and supportive of leaders. And that’s not going to change. I'm sorry, but I don't disclose discussions, I don’t.

JOURNALIST:

Did you last week, on Monday, accuse Malcolm Turnbull of not being loyal?

TREASURER:

I’m not going to - I was asked that question by the Labor Party yesterday in Parliament and I refer you to that answer.

JOURNALIST:

It's been reported today that Scott Morrison has been offered Treasury. I’m sure you are not going to confirm that, but do you expect to be in this job next week?

TREASURER:

No I am not going to answer that question and I am not going to speculate on it, Fran. I am not going to take anything out of context. I don't want you to take me out of context. I have a job to do. It's what I swore on the bible to the Governor General I would do. I am continuing to do my job to the best of my ability.

JOURNALIST:

On Monday, Malcolm Turnbull basically made the point that there needs to be a new economic narrative and basically it hasn't been sold to the Australian people. Do you admit that perhaps there were missteps along the way? What should happen now?

TREASURER:

As I said, you can always do more to better sell something and you can always do more to strengthen the Australian economy. That is why this is an unfinished task. It’s unfinished. But, you know, we got rid of five taxes - guys, job creation in Australia is 10 times what we inherited. 10 times! The best thing I can do is help Australians to get a job and it's hard. The Australian economy is restructuring. It is restructuring but we are managing it. Australia is managing it better than any other comparable country in the world. I am very proud of that for my nation, but we should aspire to do better and there is nothing wrong with that aspiration.

JOURNALIST:

How is Mr Abbott and do you expect him to continue in politics?

TREASURER:

Well, that will be a matter for him. We’ve had numerous excellent chats and these are issues for other people. I am not going to speculate on it Fran.

JOURNALIST:

Assuming you are not Treasurer next week and looking back on this time 10 years into the future, what would you want your legacy as Treasurer to be?

TREASURER:

I am not going to buy into that. Have we got any other questions? Jacob you haven't asked one.

JOURNALIST:

Do you want to maintain the job? Do you want to keep the job and finish what you started to do?

TREASURER:

I want to make a difference for Australia. What I laid down 20 years ago in my maiden speech it hasn't changed. It hasn't changed. I want to do my very best for my country. Simple as that.

JOURNALIST:

This morning Ray Hadley was reading out the names of people who voted for Malcolm Turnbull…

TREASURER:

I don't think he would have read out my name…

JOURNALIST:

There are a lot of Liberal supporters who are angry at Monday night's events. What is your message to them about any anger over the removal of Tony Abbott and any reluctance to accept the new Prime Minister?

TREASURER:

My message is - the worst thing you can possibly do is see a change of Government. We had six years of Labor. It was bad in policy, bad in principle. They did some things right, but they did a hell of a lot of damage to the country. We are collectively doing our best to improve Australia and we will continue to do it. We will continue to do it. Now just two more, Lane you haven't asked one. Fran, you have to put your hand up! [laughter] Lane.

JOURNALIST:

Do you want to stay in the ministry in some capacity?

TREASURER:

I’ve have had discussions with the Prime Minister about that and I will leave it to those discussions.

JOURNALIST:

Question for the Tax Commissioner - you just said what a good job Treasurer Hockey had done on the international stage and international tax avoidance. Do you believe he should stay in the job?

COMMISSIONER:

I think I will leave the politics for the politicians.

TREASURER:

Mark, we will go to you.

JOURNALIST:

We heard today that Minister Dutton offered his resignation to the Prime Minister. Have you offered yours?

TREASURER:

I’m not discussing what I discussed with the Prime Minister.

JOURNALIST:

Mr Hockey is this press conference a statement to the Prime Minister, a plea to him that you would like to stay as Treasurer?

TREASURER:

No, not at all.

JOURNALIST:

Treasurer, do you believe that the Government's chances have actually improved? You talked about the worst thing being a seat in Government to the Opposition. Do you believe that the Government's chances of surviving the next election have now improved?

TREASURER:

I will leave that to the commentators.

JOURNALIST:

What's the personal impact of the last few days been to you?

TREASURER:

That’s a bit self-indulgent. I’ll leave it there and thank you all for coming.

Mr Turnbull made a number of claims about economic leadership that are completely unfounded. He has never said to me, or to the Cabinet, that we are heading in the wrong economic direction. The disloyalty of some has been outrageous. We have an economic plan that is being delivered and is working, an economy that is $68 billion bigger than the one that we inherited. We've abolished five Labor taxes and we collect less tax than if Labor were in government. We've improved the Budget bottom line by $50 billion, negotiated three free trade agreements, delivered over $50 billion of new infrastructure, but most importantly of all, 300,000 new jobs in Australia since we were elected. Jobs growth is running at 10 times the rate per month that we inherited from Labor. The position of Prime Minister is a gift of you - the Australian people. You have the right to hire and only you have the right to fire. We cannot - we must not - become a carbon copy of the Labor Party. We cannot - and we must not - make the same mistakes that were made in the Rudd and Gillard years. The Australian people deserve better. We must put the national interest ahead of any self-interest. The Prime Minister has my absolute loyalty as I have his. Thank you very much.

Joe Hockey joins me this morning, the Federal Treasurer. As the Government seems indeed to be voting no confidence in itself, Mr Hockey good morning to you.

TREASURER:

Good morning Jon.

JON FAINE:

The instability, the headlines, the constant swirling rumours – that is a vote of no confidence in the Abbott Government from its own ranks, is it not?

TREASURER:

No. No it’s not true, and it’s just commentary and gossip. We’re getting on with the job – the unemployment rate fell from 6.4 to 6.1 in Victoria last month. 93,000 new jobs created since the election in Victoria. So, we’re getting on with the job, Jon.

JON FAINE:

I understand that comes from the briefing sheets but nobody’s believing you Joe Hockey including your own backbench.

TREASURER:

No, no, no, hang on, that’s not the briefing sheets, that’s actually data from the Australian Bureau of Statistics…

JON FAINE:

In your briefing sheets, but it’s not working [inaudible]…

TREASURER:

Well no, no, hang on it’s not briefing sheets, Jon. It’s what the data is. You know, you look at it and say isn’t it great that 62,000 new dwellings have started construction in Victoria in the last 12 months. This is jobs, 250,000 people working in construction…

JON FAINE:

Do you walk the plank to save Tony Abbott’s neck?

TREASURER:

I’m not going to get involved in commentary and gossip, I mean Canberra is…

JON FAINE:

You are involved in it whether you like it or not, you are involved in it.

TREASURER:

No I’m not, no I’m not, no I’m not. Because I’m focused on doing my job, everyone is focused on doing their job. There is a lot of gossip, a lot of rumours, and you just can’t respond to that because the Australian people expect us to get on with doing the things that make their lives better.

JON FAINE:

It’s designed to sabotage Canning all of this isn’t it? The headlines, the briefing, the behind-the-scenes meetings – designed to sabotage Canning. It increases the swing against Tony Abbott which triggers more panic amongst the backbench who are nervous about their own jobs, protecting the swing to their own seats and that makes a challenge almost inevitable, does it not?

TREASURER:

Well, Jon, again I say it is hugely important that we focus on doing what the Australian people expect. In my case that is rolling out the tax reform that is going to build a stronger economy, fixing the Budget, building the infrastructure. I’m in discussions with the Victorian Government about how to get on with the job of filling the infrastructure vacuum associated with the abolition of the East West Tunnel…

JON FAINE:

You’ve been talking about that now for what, nearly a year it must be…

TREASURER:

Well I’m waiting. I’m waiting on the Victorian Government to give us the proposal. We’re still waiting for the details of the Western Link of East West which is meant to be coming to us. They’re sitting on $1.5 billion of Commonwealth money that was appropriated for the East West Link. We’re still committed to that project – I know you don’t like it, I know you don’t like it…

JON FAINE:

Are you still refusing to put money into public transport in Melbourne?

TREASURER:

No, well we are prepared to put it into public transport because of the sale of the Port of Melbourne, which I support the Victorian Government on. I want them to get on with the sale of the Port of Melbourne. If they take those proceeds and put them into public transport in the middle of Melbourne, we will be supportive of that and we will give them a 15 per cent bonus. A 15 per cent bonus, so yes, our money will go into public transport in the middle of Melbourne…

JON FAINE:

Except everybody is sitting around talking about leadership, talking about by-elections, talking about leadership speculation…

TREASURER:

No, no, no…

JON FAINE:

…And no one is concentrating on the things that you’re wishing you could concentrate on.

Well every newspaper in the country has it on their front page virtually.

TREASURER:

Well, you know, this is what happens in the modern world. I mean I’ve been in politics nearly two decades now and it seems that in the modern world there’s this sort of stuff but the main thing is the Australian people see through it and they want results. Good news – the value of merchandise exports from Victoria increased nearly five per cent in the last 12 months, that’s great, lower Aussie dollar…

JON FAINE:

Joe Hockey even The Australian which is your loudest cheer squad…

TREASURER:

[laughs] not mine…

JON FAINE:

PM urged to stare down plotters, Ministers say challenge to Abbott “inevitable” as Turnbull’s support grows.

TREASURER:

Jon again, I just talk about the things that matter to everyday Australians and the lower Australian dollar is helping manufacturing in Victoria, which is very, very important. It’s a huge employer as you know and Victoria has had a pretty tough time with what’s happened to the car industry and other industries, but you’re starting to see employment pick up and obviously the Free Trade Agreement with China is going to be hugely significant for Victoria, very positive for Victoria, and we’re trying to get that through Parliament.

JON FAINE:

Well let’s turn to the economy…

TREASURER:

Hooray!

JON FAINE:

You’ve put all your eggs into the mining basket and your Budget predictions from your previous Budgets have been blown to smithereens. In fact your economic credentials are glaringly exposed for everyone to see how inaccurate they are.

TREASURER:

Wrong. Dead wrong on a number of fronts.

JON FAINE:

Well, on which bit?

TREASURER:

Well the starting point is…

JON FAINE:

Growth is stalling, recession is looming…

TREASURER:

Hang on, hang on…

JON FAINE:

…the surplus is vanishing into the distant future if indeed it ever arrives at all.

TREASURER:

Well, that’s all wrong. I’ll just say to you a number of points. Firstly, you said we put all our eggs in the mining basket. The mining industry represents around ten per cent of our economy, 55 per cent of our exports, and in fact in volume terms last month we had record iron ore go through Port Hedland. But the big area of growth and opportunity in Australia into the future is services. That is healthcare, tourism, education, financial services – which is 70 per cent of the economy, 80 per cent of jobs, but just 17 per cent of exports. Now as the Chinese economy moves from an investment phase into a consumption phase – we’ve got good data that indicates that is happening in China at the moment…

JON FAINE:

As their growth stalls.

TREASURER:

Well no, it’s not stalling, that’s not right. They’re still forecasting seven per cent, even if you don’t believe their seven per cent growth…

JON FAINE:

And I don’t.

TREASURER:

Their contribution to global output at the moment is the same as it was just four or five years ago, and the Reserve Bank said that just the other day – they represent 30 per cent of global growth this year. So the Chinese consumption story, where they will want our education services, our health services, aged care services and a range of others. We’re able to export our expertise in those things to China and importantly, at the same time, get rid of some of the taxes they’re imposing on our goods under the Free Trade Agreement. Like taxes on our wine industry, on our beef, on our dairy, on a range of other things including financial services as well.

JON FAINE:

This is an import and export agreement principally though isn’t it Joe Hockey. This is an agreement about China having access to more of Australia as a market and in exchange we get to export some services.

TREASURER:

Well, the fundamental point is we have a $150 billion a year trade relationship with China. They’re by far our biggest trading partner. We export $100 billion to them…

JON FAINE:

Mostly minerals.

TREASURER:

Well no, it’s around about half, just over half is minerals – or iron ore in particular…

JON FAINE:

And coal.

TREASURER:

Coal’s come down a bit; coal’s come down a bit in volumes. Because they’re actually protecting their local coal industry, they put a tax on our coal – under our Free Trade Agreement they’re abolishing the tax on our coal…

JON FAINE:

And they want greater access to Australia as both a labour market and also an export market.

TREASURER:

Well not particularly – no, not as a labour market actually. They want to build a relationship with Australia because we are a strong, reliable source of goods and services for them. Look, we are a small player in their lives. As I was just about to say, the relationship with China benefits us by two dollars to every one dollar we spend. So we import $50 billion from them each year, we export $100 billion to them each year. So, any dollar we can improve the relationship with, we win 2-1 as a nation, we’re richer 2-1. We’re just 23, 24 million people, that’s the size of a city…

JON FAINE:

Oh yeah, there are cities in China that are as big as the Australian population, we do understand that Joe Hockey.

TREASURER:

But that’s very important Jon, because you know we shouldn’t pretend that we are crucial for China, and if this Free Trade Agreement doesn’t get through – where they lift the taxes on our exports to them, they get rid of a whole range of taxes on our exports. If that doesn’t get through, we won’t be able to get back there for ten years, they’ll just move on to all the other pressures they’ve got in the economy…

JON FAINE:

And there are plenty of people who say if that secures Australian jobs for Australian workers, that’s a price worth paying.

TREASURER:

Yeah, well it is going to do that, it is doing that, there’s no doubt about that. I mean free trade – we are an exporting nation. We produce much more than we consume as a nation and therefore we are the big beneficiaries of free trade. New Zealand, I’ll give you an example…

JON FAINE:

Some people are, some people are saying well I won’t, I’ll be the loser and if you work in the car industry for instance and you see the Australian dollar back at the levels where the Australian car manufacturing companies were totally sustainable, you despair at the tens of thousands of jobs that are going out the door there.

TREASURER:

Well…

JON FAINE:

And you blame Joe Hockey.

TREASURER:

Well, I’m sure they’ll blame me, but…

JON FAINE:

No but you stood there in the Parliament and you wagged your finger at them and dared them to leave and they did when the dollar was up above parity. Now it’s back where it’s totally sustainable on your watch Joe Hockey. In no time at all it’s back at the levels where those jobs did not need to go.

TREASURER:

Well, Jon, if they were going to make profits in Australia, if they were making profits in Australia…

JON FAINE:

And they were.

TREASURER:

They weren’t. Let’s be fair dinkum about it, they weren’t. The cheque from Australian taxpayers was going straight to Seattle and that was reflected in their accounts, so…

JON FAINE:

Well their profits go straight to Seattle too, so what’s the point of that?

TREASURER:

There was no profit, there was no profit…

JON FAINE:

The jobs were staying here, thousands and thousands of them.

TREASURER:

Well, I’m sorry that’s wrong…

JON FAINE:

Which bit? Which bit of what I just said is wrong? The jobs were here, tens of thousands of them and most of them in Victoria.

TREASURER:

A number of car manufacturers had decided to leave before we even came to Government, and you know that…

JON FAINE:

Years ago. Chrysler in Adelaide years ago. The industry was totally sustainable - Ford, Holden and Toyota. They had factories, including Toyota’s state-of-the-art factory which is now going to be mothballed for no reason whatsoever.

TREASURER:

Well, it is sad that that has happened…

JON FAINE:

It’s negligent.

TREASURER:

But Jon, the fundamental point is we have to empower Victorian businesses to go out there and have a go. That’s why in the Budget, 512,000 Victorian small businesses got a tax cut. We’ve seen the unemployment rate drop from 6.4 to 6.1 in Victoria in the last month. Since my last Budget in May, 60,000 new jobs have been created in Australia. In the three months after Wayne Swan’s last Budget, 500 jobs.

JON FAINE:

Do you concede that the car industry would be sustainable again now if you hadn’t killed it?

TREASURER:

No, the car industry they made a decision. The executives in the car industry made decisions years ago about the future of the car industry…

JON FAINE:

Not years ago, no, because you dared them to go. You said, you personally said to them and in the Parliament you taunted them, Joe Hockey.

TREASURER:

No I didn’t, I’m sorry Jon again I don’t accept the premise of your question. The fundamental point is we want the whole economy to grow, and there will be businesses that from time to time close. But the good news is that bankruptcies and business failures are at the lowest level now for years and years. What we’re starting to see is opportunity come and we don’t want to miss the opportunity. The opportunity is in a range of different areas. For example, telecommunications exports from Victoria, telecommunications, computer, information services – they’ve more than doubled over the last decade, and we see great opportunity in the future as a result of opening the door. We’ve kicked open the doors in Japan, Korea and now China with these trade agreements, to give our community better opportunities and jobs in the future. That’s paying a dividend; it’s paying a dividend in real jobs.

JON FAINE:

Okay, my time is not unlimited so let’s move to the report released overnight from Deloitte saying that a 15 per cent GST would allow you to cut the company tax rate to 25 per cent, are you tempted?

TREASURER:

Well, we have a tax reform process underway. It is a high quality submission, there’s no doubt about that. When someone goes to the effort of doing some economic modelling and costing, it helps the process and helps to better inform debate. We’ve received 850 submissions. I’ve discussed it with the Victorian Government, all state governments, and we’re continuing to work our way through.

JON FAINE:

You haven’t told me anything…

TREASURER:

No [laughter].

JON FAINE:

Are you tempted?

TREASURER:

Am I tempted to tell you anything? [Laughter]. Not on this at the moment, but I’d say to you – look it is really important we have tax reform. It is hugely important we prepare the economy, it’s a new economy…

JON FAINE:

But what sort of tax reform? You disappointed the conference of accountants when you stood up and…

TREASURER:

No I didn’t, no I didn’t…

JON FAINE:

Well they said they were disappointed because there was no detail in what you had to say. The nation is ready for some detail, why don’t you tell us which way you’d like to jump.

TREASURER:

Well firstly, the one accounting firm, representative body that didn’t want to participate and spat the dummy was the one that was disappointed, but everyone else was pretty happy with it. Secondly, in relation to tax, I’ll give you an example. This week I am introducing into Parliament world leading legislation that is going to crack down on multinationals not paying their fair share of tax. In Turkey last weekend, not this recent weekend but the weekend before, I flagged to the G20 we were moving on this. We, together with the United Kingdom, are leading the world in cracking down on multinationals that are not paying their fair share of tax.

JON FAINE:

How much will that gather and generate for the Australian Government in income?

TREASURER:

The reason why I’m not putting a specific numbers is, just to be clear – we embedded people, tax office people, in the 30 companies that we thought were not paying their fair share of tax, learnt something about their business models, and under our legislation we will make an assumption about what their profits are. They will contest that. I’m not going to do what the previous government did and put a number on the mining tax – they put a number on the mining tax and the mining tax never raised a dollar. This I’d rather under promise and over deliver and on the multinationals I can assure you there will be a dividend for Australian taxpayers as a result of what we’re doing. But to put a specific number on it…

JON FAINE:

So you’ll pass tough laws but you won’t actually guarantee that they’ll raise a zac.

TREASURER:

Well they will, they will raise money but Jon, I’m not going to make the mistake that the previous government made, where firstly, you flag to those companies, because it’s only 30 companies, you flag to them how much you’re going to try and get out of them…

JON FAINE:

Well they all know who they are.

TREASURER:

Well that’s right, and then they change their behaviour. Then they change their behaviour…

JON FAINE:

Well if they change their behaviour to comply, that’s a good thing.

TREASURER:

Well, correct. That’s what I’m endeavouring to do.

JON FAINE:

Carry a big stick.

TREASURER:

I’m carrying a big stick and on this occasion I’m not speaking too softly.

JON FAINE:

Separately, Michael West in the Fairfax newspapers, The Age and the Sydney Morning Herald, has been explaining to us exactly how porous Australia’s money laundering laws are. In particular with the Chief Minister of Sarawak, Taib Mahmud and his family’s extraordinary investments. Not just in this country but 400 companies in 25 countries and a vast fortune built on apparently very little income as the Chief Minister of Sarawak. And significant investments here in Australia, have you been following the story and are you concerned?

TREASURER:

I haven’t been following the story but in relation to money laundering – I have introduced last week, in the last few weeks, some very tough legislation in relation to foreign investment as you’d know. We’ve been working with the Australian Federal Police on money laundering issues. The fundamental point is you need other countries to notify the Australian Federal Police that a crime has been committed and then that the proceeds of crime are coming into Australia. So, at the moment, globally, it is very difficult to identify money laundering, other than through the payment system where there are extraordinary amounts of money…

JON FAINE:

Okay, if it was a drug dealer who had 400 companies in 25 countries and no apparent explanation for their extraordinary wealth, you would seize their assets and have some reverse presumptions in order to justify the changes. Here it’s white collar crime being alleged. The Chief Minister of Sarawak who earns a couple of hundred thousand dollars a year has a fortune of billions of dollars squirrelled away in assets all around the world and everyone goes tut tut not much we can do about it.

TREASURER:

Well, before you can actually proceed you need to be sure that it’s not inherited wealth, or it’s not gifted wealth, whatever that might mean, or you know…

JON FAINE:

No it’s plundered, it’s plundered from the people of one of the poorest places on earth.

TREASURER:

And should that be true and I’m very aware of the defamation laws, so I don’t want to go down that path. But should that be true, if that is true, it is a grievous form of heinous corruption. Corruption is a cancer in community and you know if there’s any evidence of corruption and any evidence of money laundering into Australia as a result of corruption, I would expect the Federal Police to get onto it immediately.

JON FAINE:

Just finally, with your family’s personal experience of asylum seeking, refugees and finding a new life in a new country, do you think Australia is doing enough? Even with the 12,000 in trying to resettle people from the Middle East?

TREASURER:

Well, Jon, it is a significant announcement. You’re right, I’m the son of a refugee from the Middle East into Australia many years ago. We are a great country, a great, great country. And you know this is one of many reasons why 12,000 is a significant number – because we’re going beyond the refugee camps and going into places where people have been seeking refuge. As I said I was in Turkey two weeks ago, I had a very lengthy conversation with the Prime Minister of Turkey about what’s happening there. They’ve got 2.1 million refugees in their country at the moment. His view, and the view of a number of others, is there needs to be a separate state created in Syria. That would become a refuge for people to go back – but that’s very, very complicated, I mean Syria is a mess.

JON FAINE:

There’s no doubt about that.

TREASURER:

To repatriate people wherever they may be, and I see Germany has just closed its borders, you actually need to have a safe haven for them. The fundamental point is that while Assad is letting off chemical weapons against his own people, you’re never going to have a safe haven. So, it is unbelievably complex. Australia is exceeding the rest of the world in its generosity given how far away we are and given our population, but we are a great nation and it’s one of the reasons why we are.

JON FAINE:

I have gone way over time but thank you indeed for indulging me this morning and thank you for your comments on all those issues. Joe Hockey, the Federal Treasurer, speaking to us from the national capital.

Neil, I’m going to disappoint you and not engage in commentary on commentary. I’m getting on with the job of helping to create more jobs and delivering good tax changes to make life easier for people.

NEIL MITCHELL:

Well, isn’t it all a bit perverting at the moment though?

TREASURER:

Well, not at all. In fact this week I’m going to introduce legislation into parliament to go after the multinationals that are not paying their fair share of tax. This is something I’ve been working on for quite a while with the United Kingdom Chancellor of the Exchequer. And we’re leading the world in many ways in this regard. So we’re getting on with the job. We’ve also got some significant legislation before the parliament on foreign investment which is an issue near and dear to many of your listeners.

NEIL MITCHELL:

So why does it seem most of the party, and most of the public, is obsessed by the leadership?

TREASURER:

Well, I don’t think they are. I think people are expecting the government to get on with governing and that’s exactly what we’re doing. I mean 90,000 new jobs created in Victoria since the election. The jobless rate in Victoria just fell from 6.4 to 6.1 and you’ve got 62,000 dwellings under construction in Victoria in the last 12 months. This is the stuff that matters to people.

NEIL MITCHELL:

But Mr Nikolic has confirmed himself that he contacted Malcolm Turnbull and said please make a statement of support for the Prime Minister. Why would that be happening?

TREASURER:

Oh look, I’m just not aware of that and the whips…

NEIL MITCHELL:

He confirmed it publically.

TREASURER:

The whips do what the whips do. But from my perspective and that of the Prime Minister and the government, we are endeavouring to get through the static of commentary and focus on delivering things that actually matter. And the Prime Minister has already flagged that this week he’ll have a major announcement about dealing with domestic violence which is an issue I know that you’re keen to see properly addressed as well.

NEIL MITCHELL:

Let me put it this way. Is there a need for a statement of reaffirmation of loyalty for the Prime Minister?

TREASURER:

Again, Neil, the only statements we should be making are about how we can create more jobs and greater prosperity. And my multinational tax initiative this week – I’ll have a couple of other surprises this week and why? Because people want us to get on with governing. I know this is going to be frustrating for you but I just won’t entertain commentary on commentary. I’m not going to participate in that.

NEIL MITCHELL:

Well, what about an early election? Is there any possibility of an election this year?

TREASURER:

Well, we’ve still got a lot to do. I mean I’ve got 850 submissions in relation to tax reform that have come in and we’re working our way through that. As the Prime Minister and your Premier have said they’re working away at federation reform. That’s very complicated, that links in with tax reform. We’ve still got a lot to do. We’ve still got a big infrastructure roll out and I’m endeavouring to work with the Victorian Government as closely as possible, to identity the big projects that are going to create the jobs, to fill the vacuum from East West which I still remain very annoyed about.

NEIL MITCHELL:

Where is the money? Where’s the money?

TREASURER:

Well it’s still sitting in the Victorian Government coffers. One and a half billion still there…

NEIL MITCHELL:

So who’s got it on the books? Is it on your books?

TREASURER:

He has. Well he’s got it in his pocket, Daniel Andrews, and I’ve asked for it back if they’re not prepared to spend it. We still have, we’ve put it into our budget papers, a contingent liability for $3 billion to build the East West Link. We’re still waiting for the Victorian Government to give us the plans for the so called West Link - the western side which we’re all waiting for.

NEIL MITCHELL:

So you haven’t got that yet? There’s no [inaudible]?

TREASURER:

No, I haven’t received it yet. So we’re just waiting. And in the meantime, the construction industry employs a quarter of a million people in Victoria. And thankfully the housing construction’s terrific in Victoria, but nothing lasts forever and we’ve got to get on with the major infrastructure projects and we’re still waiting on the Victorian Government.

NEIL MITCHELL:

So you see no need for an early election?

TREASURER:

Well, no as I said, we’ve got work underway. We’ve got a huge amount of work underway in relation to infrastructure, jobs, tax reform, federation reform, dealing with major social issues like domestic violence as you saw this week. This last seven days we took 12,000 extra refugees from Syria, were dealing with that. We’ve actually just started becoming involved in air warfare strikes in Syria. That’s a very significant issue that goes to our national security.

NEIL MITCHELL:

But none of that rules out an election?

TREASURER:

Well, the fundamental point is an election is not due until the end of next year…

NEIL MITCHELL:

Yeah, but it can be held earlier…

TREASURER:

Well Neil, as I said, we’ve got plenty on our plates at the moment. We’ve got plenty on our plates…

NEIL MITCHELL:

But that’s not what…

TREASURER:

We’ve got our fighter jets flying over Syria and Iraq. We’re dealing with 12,000 extra refugees. Tax reform. Federation reform. I’m dealing with foreign investment reform as well in my portfolio. We’re trying to get the infrastructure rolled out across the nation that builds more jobs. We’ve got the China-Australia free trade agreement. We’ve still got higher education reforms to go through the Senate. We’ve still got a backlog of welfare reforms that we’re working our way through. There’s plenty on, the job of government, rather than the cacophony of commentary…

NEIL MITCHELL:

So an election would interrupt all that would it?

TREASURER:

Well, again, I’m not going to speculate on elections…

NEIL MITCHELL:

Okay.

TREASURER:

I mean, there’s a by-election this weekend Neil…

NEIL MITCHELL:

Okay.

TREASURER:

And in Western Australia, that’s enough elections for the moment in my view.

NEIL MITCHELL:

Can I ask you about the refugees you mentioned - where’s the money coming from? They’re going to cost a lot of money. I see the estimates are $700 million over four years. I think it could even be double that if you look at some of the estimates previously. Where do you get the $700 million, where do you cut back?

TREASURER:

This is why we’ve got to have savings to pay for it, we always do. We try and make sure that wherever we spend money we save money. When I deliver the Mid-Year update at the end of the year there will be a full account for that. The instinct is absolutely right of the Prime Minister and that is to step up to the plate to help out those most vulnerable in this circumstance. 12,000 refugees and you know, it is a significant ask, but the Australian people are compassionate Neil. We do the right thing, provided proper processes are followed. It will be between $600 and $700 million depending on the speed in which we can bring people to Australia. But this is what we do. This is why we’re a great nation.

NEIL MITCHELL:

What’s the mood in government at the moment, how would you describe it?

TREASURER:

I think there’s a steely determination amongst many to get on with the job. You know, everyone has a job to do. I was speaking to one of my colleagues in a marginal seat last night and she was just saying to me that we’re getting on with the job. She’s got stuff in her electorate that she’s endeavouring to roll out and I’m trying to help her with it and that’s what we’re doing.

NEIL MITCHELL:

I read that Malcolm Turnbull, Julie Bishop and Ian McFarlane are all a bit grumpy with you for cutting their budgets. Is that right?

TREASURER:

Well again, Neil…

NEIL MITCHELL:

Gossip? Speculation?

TREASURER:

No, no, no - the fact is that we’ve got to make hard decisions around the place in order to live within our means, so we can have the money to pay for 12,000 extra refugees. Where you can get rid of waste, where you can get rid of duplication, where you can reduce programs and have better outcomes that’s exactly what I’ve been endeavouring to do with the Finance Minister. Look, there’ll be a push back along the way but I’m very precious about taxpayers money. It’s not my money, it’s everyone’s money, it’s all your listeners’ money and I’m trying to be as precious and as careful with it as possible.

NEIL MITCHELL:

Those three didn’t take it well, didn’t they?

TREASURER:

I’m not going to get into the reactions of individual ministers but I’m sure when your chief financial officer comes around and says, Neil, we’re going to cut some of your budget, you get a little upset about it from time to time but you’re a team player and everyone else is a team player and we’re trying to do what is right.

NEIL MITCHELL:

You’re full of team players - in cabinet?

TREASURER:

We’re all team players Neil, all team players.

NEIL MITCHELL:

Hey, speaking of teams, not this weekend the following weekend there’s no Australian football being played in Melbourne, in the middle of the finals, it’ll be played in the west. However, Melbourne Storm’s playing here, we don’t know who they’re playing yet. Couldn’t we move them to the MCG? You’re a rugby league expert, what do you think? MCG for Melbourne Storm game?

TREASURER:

Well, I don’t think there is any greater venue for sport in the world than the MCG. I don’t think there is any greater crowd following sport, all forms of sport, than the Victorian crowds and the MCG is the premier venue. I would think so. Having said that, rugby league doesn’t lend itself too well to a cricket oval. But I’ve been to the MCG for rugby tests previously and the venue is electric. I mean it is the greatest sporting venue in the world. Take advantage of it.

NEIL MITCHELL:

Thanks for talking to us. One last try - Tony Abbott has your unequivocal support?

TREASURER:

Always has, always will, Neil.

NEIL MITCHELL:

Does he?

TREASURER:

Always has, always will. We go back a very long way and I know Tony Abbott is absolutely dedicated to the best interests of the nation. I have absolutely no doubt about that. He is the most selfless and dedicated person I have met in politics.

NEIL MITCHELL:

Does he have unified support of the cabinet?

TREASURER:

Well of course he does. We’re all working together to deliver better outcomes Neil and I won’t be distracted by commentary.

NEIL MITCHELL:

It doesn’t feel like it out here.

TREASURER:

Well, Neil, put your hands somewhere else and feel all the jobs being created and the businesses that are underway and the infrastructure that is being built. Touch that.

The Treasurer Joe Hockey is keen to talk about a good piece of economic news. He’s in the studio. Would you have still come in had the news been bad?

TREASURER:

Yes, I would. I would Ray, absolutely. Well you know I’m responsible whether it’s good or bad but I think it is a sign that our plan is working, our economic plan is working. There will be month-to-month volatility. You look out the window Ray; there are as of this morning 75 registered operating cranes in the Sydney CBD. There’s about 50 operating tall cranes in Western Sydney and you compare it with some other parts of the country where the partnership with the state governments isn’t as good as it could be because the state governments would rather be at war with us. I know you broadcast into Queensland…

RAY HADLEY:

Let’s stop there. We go into 4BC, the capital, Brisbane. We go into many other centres across Queensland. The Courier Mail, as I read it every morning, is conducting a campaign at the moment…

TREASURER:

It’s a very good paper…

RAY HADLEY:

Yes…

TREASURER:

It is a very good paper.

RAY HADLEY:

[Laughter] I would agree [inaudible] litigious problems with them either. I can’t say the same about Fairfax who apparently are our partners these days…

TREASURER:

Oh, you know what, they own you!

RAY HADLEY:

No they don’t, they don’t own me.

TREASURER:

Oh no, no, no, they don’t own you.

RAY HADLEY:

Let me assure you no one owns me…

TREASURER:

I know that, but sorry, they own you collectively – 2GB and…

RAY HADLEY:

They have a tick over 50 per cent but that won’t make a difference to what I say…

TREASURER:

Good.

RAY HADLEY:

They’ve been running a campaign through Christopher Dore, their editor up there, about the fact that they’re stagnant. Businesses are really concerned that Annastacia Palaszczuk is really big on talk but very small on action. So let’s cut to the chase and let’s deal with that. You’ve got all these cranes all over Western Sydney. I go to Western Sydney every day of my life, I see the building, I see the units going up, I see the houses, I see the roads being put in, I see the infrastructure going up for the new North West Rail Link – I see all of that. They say in Brisbane they’re not seeing that under the Labor Government. Does that concern you?

TREASURER:

Yes, of course. I have had numerous discussions with the state treasurer and I even went to his office on a number of occasions to talk to him about it. We keep asking for the developed projects that are going to create the jobs. And he has written to me with a suggestion of some projects, but they’re still very undeveloped. We are absolutely committed to the Toowoomba Range Crossing; we’re absolutely committed and implementing significant increases in funding for the Bruce Highway. There are other projects that I am looking at in Northern Queensland under our Northern Australia Infrastructure Facility which I announced in the Budget, a $5 billion facility. But ultimately, you’ve got to have a state government that wants to get on with the job. And you know, I ring up Mike Baird, he rings me all the time. We say what can we do on this project, what can we do on that project. The federal government will be as flexible and accommodative as possible to create the jobs. And you can see the contrast Ray, you can see the contrast between the around 123,000 jobs created in New South Wales since we were elected, and the 30,000 jobs in Queensland. Now having said that, to be fair, Queensland has suffered because of the fall in coal prices. Central Queensland as you know has seen a lot of jobs go. That’s one of the reasons why we really want the Adani mine to happen and we’re prepared to do everything we can to get some of the green groups out of the way.

RAY HADLEY:

And those wide mouthed frogs that are stopping things in that part of the world. That’s the conundrum you have in that the Palaszczuk Government was opposed to everything that Campbell Newman stood for. And obviously he was consigned to the waste paper basket of political history. But there’s surely among all the things that he was proposing to do, there must be some good things there. So philosophically, the Labor Government can’t simply say no, it was Newman’s idea that was a bad idea. And now they’re starting to find in government it’s a bit different. All of a sudden after opposing a whole range of things they’re saying this Adani mine’s not a bad idea. This is something we need to support and make sure it happens.

TREASURER:

But then the Labor Party is voting against our proposal to help to facilitate the Adani mine in the Federal Parliament.

RAY HADLEY:

Even though the Queensland state government is supportive of it now…

TREASURER:

Yep, yeah, that’s right.

RAY HADLEY:

Okay let’s extend it a bit further, away from directly your portfolio - the free trade agreement with China. Now there were headlines everywhere today that it could be at risk. Sky News is reporting that unless we say yes, the Chinese might just say chewy on your boot, we’re not going to go with you. I mean, when will Bill Shorten actually stop being beholden to the CFMEU and stand up for Australia?

TREASURER:

He’ll always be the beholden to the CFMEU. Bill Shorten is a union leader I don’t even think - he’s not a working man, he’s a union leader man, he’s all about protecting his union leader mates. Now, I met with Lou Jiwei the Finance Minister of China last weekend in Turkey. I met with Chairman Xu the Head of the National Development Committee of China three weeks ago. Let me be very clear. China will walk away from any free trade negotiations should Mr Shorten succeed.

RAY HADLEY:

So they’ve indicated to you at the highest level that if there’s any change to what they’ve proposed and what you’ve accepted as a government, if there are any changes, it’s ta ta time?

TREASURER:

It’s taken ten years to negotiate this.

RAY HADLEY:

Right.

TREASURER:

They’ve got massive other priorities; I mean we see it every day in the news. You look at the Chinese stock market, the change in their economy. They’ve got other priorities. They have given Australia a leg up that they’ve given no one else of our scale or size. Let me be really clear. Our two way trade with China is $150 billion a year. Of that $150 billion a year, we get two dollars and they get one. So, we get two dollars because they buy $100 billion of our products and services. We only buy $50 billion of theirs.

RAY HADLEY:

So it’s all our way basically.

TREASURER:

All our way, every dollar, every dollar of increased trade with China works to our advantage and makes us richer and gives us more and better paying jobs.

RAY HADLEY:

But in the world scheme of things, are we a bit like a pimple on a pumpkin or even on an elephant, in comparison to other nations trading with China? At the end of the day they say look, we’re trying to do these jerks down there a favour and they’re jerking us about so bugger them.

TREASURER:

Well, this is it. They can get iron ore from Brazil. They can get coal from Indonesia and a range of other places. They can get lots of different things from lots of other countries. Many countries have China as their number one trading partner, not just Australia. This is to our great advantage Ray, I can’t emphasise that enough. These are the jobs that our kids are going to have. These are the jobs. Not serving Chinese investors or Chinese owners, but actually selling to them, making profits and making us richer and more prosperous as a nation.

RAY HADLEY:

Now the report on page three of The Daily Telegraph, it’s published in the Courier Mail as well, Abbott planning purge of Cabinet. There’s people in danger, you’re not one of them according to the story, you’re unlikely to be among them. But in the strange scenario where your most loyal supporter, the Prime Minister - and he has softened, he has said it’s my expectation that you’ll continue as Treasurer. Would you take one for the team if he taps you on the shoulder? If he says, look, Joe we’re moving into election cycle, it’s next year and you’re one of my best mates, you’re a great bloke, I think you’re a great Treasurer, but we just might have to move things. We might have to put you somewhere else. Would you take one for the team without bluing or screaming?

TREASURER:

Ray, let me tell you. The only jobs that I’m focused on are the jobs of everyday Australians. 60,000 jobs have being created since I delivered the last Budget. In the same period in the last Labor Budget, 500 jobs. 60,000 jobs. You know what I care about, the guy I see outside who says, I’ve just got a job. They’re the people I care about. I mean, we can speculate every day, I mean Ray, you’ve seen speculation about all this sort of stuff…

RAY HADLEY:

Oh yeah, I know that…

TREASURER:

Even about your job. I remember people go through it all the time…

RAY HADLEY:

In 1988 I was going to be sacked as the rugby league caller and in 2015 I’m still here. I understand that. I’m governed by ratings and to a certain extent so are you. Different types of ratings…

TREASURER:

60,000 jobs since the last Budget is what I consider my ratings…

RAY HADLEY:

Let me say to you this. You know I like you as a person, I genuinely like you. I’ve known you for a long time. I warm to you…

TREASURER:

Oh no, here comes the killer blow [laughter]…

RAY HADLEY:

However, for some particular reason since you’ve come to government, I’m talking about you individually as opposed to the collective group of people that you share government with; the gloss has gone off you. I don’t know why. I don’t think you’ve done anything different in government than you did in opposition. It’s about perception I think…

TREASURER:

Ray, I’ve had my head down working at the job. It’s not an accident that you have this last month 17,000 new jobs created compared to under Labor 2,000 jobs a month. The last 12 months they were in government it was 2,000 jobs a month. We’re averaging at least four times to five times that. Now that’s because we have the asset recycling program and you can see the cranes outside, that has contributed to that. $2 billion I’ve put into New South Wales in that regard. Offered the same to Queensland and they’ve knocked it back. You know everything from Western Sydney Airport, right through to roads projects right across the nation, massive increase in Roads to Recovery for councils. But that’s just the infrastructure $50 billion. On taxation reform, you know, I know how much you care about the cabbies…

RAY HADLEY:

I do…

TREASURER:

We’re applying the GST to Uber taxis…

RAY HADLEY:

Good, can you get rid of them?

TREASURER:

It starts on the first of August. That starts on the first of August. We’ve moved on that. Multinationals paying their fair share of tax; I’ve introduced legislation that is leading the world. GST on online products which competes against many of your advertisers and others, we’ve introduced leading legislation in that regard. Cracking down on foreign investment…

RAY HADLEY:

You don’t need to convince me. I’ll say this to you. One of the things I note with Treasurers in my experience, both federal and state; it’s happened say with Michael Costa and other people in New South Wales. Whereas you can have conversations with them and I appreciate the fact that you and I have conversations publically about what you’re doing…

TREASURER:

Happy to have them privately too…

RAY HADLEY:

Well exactly. But you know, Treasurers sort of seem to be a separate breed of politician. What I’m saying is you’re so consumed by your job, that affable Joe has disappeared and really serious Joe’s there. Now not with me but it appears with some of your colleagues inside government. And I make that observation from outside looking in, I have no idea about what happens in Canberra. But it appears to me that you might be a bit off with a few of them. Maybe that’s because you’ve been so studious. You’re like the bloke getting ready for the HSC and you’ve been so studious that you forget all other aspects of your life.

TREASURER:

Well, Ray, I’ve cut a few of their budgets. I’ve cut a few of their budgets. Some of them aren’t very happy…

RAY HADLEY:

How much did you cut off the Foreign Minister’s budget?

TREASURER:

Quite a few billion in foreign aid…

RAY HADLEY:

So you can understand why Julie Bishop wouldn’t be happy with you…

TREASURER:

We had to cut funding for the ABC…

RAY HADLEY:

Not enough…

TREASURER:

We had to make…

RAY HADLEY:

Not enough - Q&A’s still on…

TREASURER:

Ray, we couldn’t write out a cheque for car manufacturers when the money was going straight to Seattle. We didn’t write out a cheque to Qantas, thank God we didn’t. Qantas has tripled in value and done all the things it needed to do, and SPC Ardmona, these are hard decisions. These are hard decisions. We’ve had to make very difficult decisions in relation to welfare as well. And of course, they’re not popular, but they’re the right thing to do for the nation…

RAY HADLEY:

Have you said to Julie Bishop it’s not personal Julie? The billion dollars that I’ve taken off you it’s not because I don’t like you, I think you’re a charming woman and a very capable minister but it’s not personal. Because it seems to me that the relationship between you and the foreign minister is not what it should be.

TREASURER:

Well, we get on well. We were having a good chat actually the other day about a few things…

RAY HADLEY:

Yeah, I bet I know what the chat was about. I bet she’s [inaudible] about something…

TREASURER:

Ray I mean, just like the accountant sometimes has to say look there’s no money. Or the chief financial officer here at Fairfax media…

RAY HADLEY:

Stop, stop. Macquarie Radio Media, nothing to do with Fairfax...

TREASURER:

Macquarie Radio, I’m with you. So you know I’ve had to make those sort of decisions. And that’s not something people in Australia in government have been familiar with previously. I mean, under the Howard-Costello Government after some early difficult decisions, there was ever increasing revenue coming in. And of course we know the Rudd-Gillard-Rudd Government put everything on the credit card, so they just kept spending and spending and spending. Well someone had to say the buck stops here, we can’t just keep writing out cheques. Now the industry portfolio for example, I’ve had to make significant cuts. We halved it. We had to reduce the public service in Canberra by 14,000...

RAY HADLEY:

No wonder fewer people like you Joe, all you’ve done is slash.

TREASURER:

No, no, but that’s not right. You make the cuts to build, and that’s how you get your 60,000 jobs, that’s how you get your $50 billion on infrastructure.

RAY HADLEY:

Very quickly, 12,000 refugees being brought in….

TREASURER:

That’s how you get your 12,000 refugees, Ray. We can afford it. We’re going to have to find the money for it…

RAY HADLEY:

$700 million which will blow to one billion...

TREASURER:

No, no, no. It is about six to seven hundred million depending on the speed in which they come in. You know, when you have money in the bank you’ve got choices. If you’ve got money in the bank it gives you the capacity to be more compassionate. That’s what I’ve continually said. We’re still running a deficit, it’s still too large, the debt is still too high, but, it’s a hell of a lot better than it would have been and it’s giving us the capacity to help.

Mr Hockey, thanks very much for your time. I want to look at this ministerial statement you gave yesterday after your talks in Turkey at the G20. You’re cautiously optimistic about the global economy, why is that?

TREASURER:

I think China’s transition is going to work in Australia’s favour, and they are managing it carefully. The United States is now looking to increase interest rates, which is a sign that their economy is growing on a sustainable basis. Europe is growing, whereas last year there was a 40 per cent chance of recession. The Japanese are turning things around which is encouraging, given they’re our second biggest trading partner. So globally, even though there’s been a slight downgrade in IMF forecasts, you can see some good indicators for growth.

KIERAN GILBERT:

You seem quite sanguine about the prospect of a rate hike by the US Federal Reserve. The IMF Managing Director Christine Lagarde isn’t so relaxed about it. Many world economists are worried that if the Fed increases the official rate there that this will lead to turmoil, particularly in developing nations and even China could see a flood of capital out of China.

TREASURER:

Well, there is a division in global opinion. The OECD for example, Angel Gurria, said at the G20 to Stanley Fischer, the Deputy Head of the US Federal Reserve, he said just do it, take away the uncertainty. If you’re going to make a decision, just do it. Now the issue is, whether the current uncertainty about the actions of the US Federal Reserve are creating more volatility than the Federal Reserve actually moving to increase rates. When they move to increase rates, the United States is still going to have an incredibly accommodative monetary policy setting. It’s still very accommodative. It’s just a signal that the United States, near full employment and with strong growth, is on a sustainable path. That’s good news for us…

KIERAN GILBERT:

But do you accept there will be some turmoil in the immediate aftermath of that?

TREASURER:

I’m not sure that there will be turmoil, but there may well be turmoil and volatility if the United States Federal Reserve does not move. So the bottom line is, we cannot as a world continue with extremely accommodative monetary policy. The only way we’re going to get good, structural long term growth is through structural change in our own economies. Australia’s doing that. We’re heading down the path of tax reform, importantly, we’re moving into infrastructure. We’re reducing some of our other costs in the economy, we’re moving from a mining and construction phase into a services exports phase. So we’re going through that transition. That’s the way we’re going to earn strong growth in the future.

KIERAN GILBERT:

Are you more in-line with the RBA Deputy Governor in terms of the growth forecast? He’s quite optimistic about the rate of growth; that it will remain at around three per cent. If the economy’s going so well right now, should unemployment today then fall when we see those official unemployment figures later today?

TREASURER:

Well Kieran, we’re going to see some volatility in the unemployment numbers because on the 1st of July we changed our job services program, so that there are about 40,000 people who previously weren’t necessarily looking for work, who now have to look for work. That will increase the workforce participation rate and it will create some volatility in the headline number. But that’s a good sign, because we want to take people off welfare and get them into work, looking for work and getting jobs.

KIERAN GILBERT:

So it could be up over six and a half per cent today?

TREASURER:

We’ll see what the number is later in the morning. Importantly, it indicates that we are getting on with the job delivering on what the Intergenerational Report said was necessary. We have to increase workforce participation. One of the pools of people that we can go to is those people who have been receiving welfare benefits but haven’t been actively looking for work, and that helps to increase the size of our economy.

KIERAN GILBERT:

It went from, correct me if I’m wrong, but 6 to 6.3 per cent with the July figures. If it went from 6.3 up over 6.5, that’s more than what the Budget had suggested, isn’t it?

TREASURER:

Well, no, the Budget forecast at the end of this financial year, 6.5, but there will be some volatility from month-to-month. But importantly, we’re seeing better job creation. We inherited job creation from the previous Labor Party of around 3,600 jobs a month. We’ve now got it well above 20,000 a month on average. That’s a good sign, but there’s more work to be done.

KIERAN GILBERT:

In terms of the China free trade agreement, we’re seeing in terms of barley and the sorghum - China buying all of our produce basically, they’re offering more than the Middle Eastern countries. This is described in the Fin today as a grain boom. How much is at stake here if we don’t get this deal through by the end of the year?

TREASURER:

It’s a huge cost to Australia if we do not have this free trade agreement. We lose future jobs. Importantly, we’ll also lose future income. And we’re competing against other countries in various markets. New Zealand is coming up to the seventh anniversary of their free trade agreement with China. The dairy boom in New Zealand has created massive wealth for that country. They’ve only got a 2.5 per cent tax on New Zealand dairy. We’re facing taxes of up to 15 per cent on Australian dairy going into China. Now as a government we’ve abolished a number of Labor taxes – the carbon tax, the mining tax, the bank deposit tax, the car manufacturing tax, and the piggy bank tax - so we abolished those. But under a free trade agreement, we’re getting the Chinese to abolish their taxes on the things we produce, which is a great win for our economy and a great win for well-paying jobs.

KIERAN GILBERT:

Just a couple of quick questions, I know you’ve got to go, but should the Prime Minister then sit down and talk with Labor about their concerns, placate them; as they say John Howard did with the Opposition before the US free trade agreement went through the Parliament? That the PM should show some leadership on that and get them around the table, resolve their problems and get on with it.

TREASURER:

Well, understand this, their complaint about the China free trade agreement is about an issue that was exactly the same under the Chile free trade agreement that they negotiated, and the Korea and Japan free trade agreements we signed last year. So why are they just taking this position in relation to the China free trade agreement. I’ll tell you why - it’s politics. The CFMEU is controlling Bill Shorten. The CFMEU helped Bill Shorten on the floor of the Labor Party convention in relation to other issues. So this is the payback. It is going to hurt Australia. It is going to hurt our reputation. Mr Shorten’s got to understand that he is friendless amongst the senior Labor echelons when it comes to opposing the free trade agreement with China.

KIERAN GILBERT:

A number of the backbench, of your backbench, want Cabinet to rethink what’s called the effects test - the change to the competition law that would have benefitted small business. Is this something that the Cabinet might reconsider? Because obviously your colleagues on the backbench believe that this is something that should happen in terms of protecting small business further?

TREASURER:

I’ve been in politics now for nearly 20 years, and being involved in one way or another with this issue for that length of time. It has always been contentious, dating way back to 1975 at the beginning of the Trade Practices Act. I’d just say to you Kieran, Cabinet hasn’t made any final decisions. We are consulting widely on potential changes. The issue is - does it benefit small business? Does it actually benefit business? Does it benefit consumers? That’s the fundamental point.

KIERAN GILBERT:

So Mr Billson wasn’t rolled on this?

TREASURER:

No, no, the issue has not been resolved by Cabinet, because we’re still seeking further advice including consulting the backbench but also by consulting interested parties.

Joe Hockey, unemployment figures coming out today. The general consensus is they might be a little better. Do you share that optimism?

TREASURER:

Well Marius, they have been a volatile series. One of the things that will become apparent over the next few months is, as a result of our changes to job services, you’re going to see more people come into workforce participation data which could mean some volatility in the headline rate. But it’s good news, because it means that we are satisfying one of the key goals of the Intergenerational Report, and that is, to increase workforce participation. And that’s a sign that the economy is doing better than expected.

MARIUS BENSON:

But the sign the economy is not doing that well is reflected in the growth figures and also the unemployment figure, because even when you discount participation, unemployment is now higher than when you came to office, 5.7 then, 5.8 now.

TREASURER:

Well, it is hugely important to understand that there have been various pressures that we as a nation have coped quite well with. Our economy, as the Deputy Governor of the Reserve Bank said yesterday, is proving to be more robust, more resilient than many other comparable economies that have faced a dramatic drop-off in commodity prices. So the resilience is broad in the Australian economy. At the same time, we’ve got much work to do to drive infrastructure and job creation.

MARIUS BENSON:

But it must be disappointing for you when you see those figures now worse than when you came to office, because you talk about various pressures and better than comparable countries. You came to office saying we’ll provide stronger growth, a stronger economy and no excuses.

TREASURER:

Well that’s right. And bear in mind the Labor Party forecast that unemployment would rise to its current levels on a lower workforce participation rate. So they were actually forecasting that if they continue with business as usual, if they were re-elected, the unemployment rate would be worse than it is today. So we have done better, but that’s no justification for complacency. Importantly, we’re running job growth, job creation, at around four times the rate that we inherited from the Labor Party. So that is also important. But as I say there’s much more work to be done.

MARIUS BENSON:

How can jobs growth be running at four times the Labor rate and still unemployment is rising?

TREASURER:

Well, because what we’re seeing is, we inherited jobs growth which before the ABS revised the figures yesterday, under Labor was 3,600 jobs a month. We’ve got it up to around 24,000 a month this year. Now that is a huge increase. You’ve got to understand the Australian economy is restructuring. We’ve had a significant amount of job losses in mining and resources, but we’ve had a significant increase in the services sector. Services represent 70 per cent of the Australian economy - around 80 per cent of all jobs in Australia - but just 17 per cent of exports. So what we’re trying to do Marius is to lift the amount of exports we have in services, such as health services, education services, tourism and a range of others. And if we can lift services exports, we’ll lift job creation in those areas.

MARIUS BENSON:

You were telling Parliament yesterday, the economy basically has a mixed outlook, but not all the indicators are down. Your opposite number, well the Shadow Finance Minister Tony Burke picked you up on that, saying not all indicators were down. He said unemployment is up, debt is up, deficit is doubled and taxes as a share of GDP are also up.

TREASURER:

Again, look at what Labor was forecasting before judging us in particular on that point of time at the last election, but I accept there’s more work to be done. Since the last election, if we want to use that as the benchmark, the Australian economy is over $60 billion larger; more than 300,000 new jobs have been created. We’ve reduced peak debt by an estimated $110 billion. We’ve reduced the overall Budget deficit estimates by around $40 billion. All of those things, despite the fact that we’ve seen iron ore drop in price from around $120 a tonne to $50 a tonne and that’s our biggest export. So, there are swings and roundabouts, but the bottom line is the Australian economy is proving more resilient and it’s better at creating jobs today than it was under the Labor Party.

Mr Hockey, it’s estimated that our military and humanitarian response to the crisis in Syria will cost about $1 billion, can we afford that?

TREASURER:

Well there’s always a cost to these things but I think Australians accept that accepting refugees in this sort of situation, and spending the money to protect ourselves and others is money well spent.

JOURNALIST:

Is it coming at the expense of anything else?

TREASURER:

No, we will fully account for the cost in the Mid-Year Economic and Fiscal Outlook.

JOURNALIST:

Considering the unemployment rate, are you worried that some of these refugees might struggle to find work, and what industries do you expect them to go into?

TREASURER:

Well Australia each year accepts a number of refugees, more than 13,000 each year. There is a cost associated with training and housing, English language skills and so on. But that’s what we do as a compassionate nation, and we should do that, we’ve always done that as a compassionate nation. I mean I’m the son of a refugee and this is what we do as a compassionate nation and I hope to God we always do it.

JOURNALIST:

Mr Hockey, can you give us a breakdown – I know Amelia mentioned $1 billion for the overall commitment. So, is that $700 million?

TREASURER:

Well, I haven’t seen that figure. The military operations are always on a no-win-no-loss basis and we’re informed that there won’t necessarily be additional sorties and we don’t at this stage envisage dramatically increasing our presence in the region. So, as for current expectations about the costs of military action, they’re not much different at all to our current costs…

JOURNALIST:

What is that current cost?

TREASURER:

Well, it depends on the number of ordnance that are dropped during the course of…

JOURNALIST:

Because it’s the same number of planes?

TREASURER:

Same number of planes, expected to be similar number of sorties. In relation to ordnance dropped, expected to be similar as well. In relation to the refugees – the costs depend ultimately on the speed in which we can process applications. There are some estimates that we could do it in a two year period. There are some estimates that it may take a little bit longer. But around $600 to $700 million is the cost associated with that, depending on the timeframe. Importantly, we need to get teams over there to assess applications and go through the proper process, and then there’s the resettlement process in Australia.

JOURNALIST:

We’re heading towards an unemployment rate by the looks of 6.5 per cent. Regardless of how you spin it, that’s not very good is it?

TREASURER:

We want to get the unemployment level down and in the Budget in May, we forecast that it would peak around six and a half per cent. There will be month-to-month variations in the unemployment rate and particularly given that we have introduced a Jobactive scheme that has seen about 40,000 people move from being inactive and on welfare to becoming active – which increases the participation rate as we saw last month. It can create some volatility in the data, but the bottom line is the Australian economy is creating between four and eight times the amount of jobs each month than it did when we came to Government.

No, because the China Free Trade Agreement is going to create jobs. New jobs in Australia, new prosperity for Australia. If we have privileged access to the fastest growing economy in our region, if we have privileged access to the second biggest economy in the world, it is a no brainer for Australia. Bear this in mind; for every dollar we spend on Chinese products in Australia, they spend two dollars on our products in China. So every dollar we increase trade with China is to our benefit by a ratio of two to one. That sounds like a damn good business deal for Australia. Thanks very much.

]]>Interview with Steve Sedgwick, CNBChttp://jbh.ministers.treasury.gov.au/transcript/195-2015/
Mon, 07 Sep 2015 04:19:35 +0000http://minister-jbh.tspace.gov.au/?post_type=transcript&p=2778Joe, really nice to meet you. Look, after all the excitement in Brisbane last year, I’ve got to say the Turkish Presidency feels like a bit of a letdown. You see, you’ve got all those lofty goals - the two trillion dollars, the two per cent extra growth, millions of extra jobs, it looks like we’ve gone backwards a bit, doesn’t it?

TREASURER:

Well I’m not sure that there is a backward step in relation to the two per cent growth target. I think all the finance ministers are very committed to it. Some have moved further, in the case of Australia we’ve moved further than our initial goal. Other countries have moved back a bit. But overall, when we hear from the IMF and the OECD at the leaders meeting at [inaudible], then we’ll know whether there has been a proper accounting process for the goal. I mean, I am absolutely sure that the only solution for the global economy at the moment is for people to earn growth through structural reform.

STEVE SEDGWICK:

Yeah, but the problem is we’ve already heard from the IMF coming in to this meeting. They’re afraid of developed powers, whether it be the UK, whether it be the US, putting up rates. They would suggest that from those kind of comments, that they don’t think we’re getting anywhere near the kind of growth that we need.

TREASURER:

Well there’s two different issues. One is, how is the world economy going now, and the second issue is, what we set down as a goal in Brisbane, and that is to increase global growth by two per cent over five years, as a result of further structural change. Now, there have been setbacks and there will be occasional setbacks, but the structural reforms coming out of Brisbane will be enduring.

STEVE SEDGWICK:

Yeah, but it just seems like we’re relying too much on monetary policy – we don’t want Yellen to [inaudible], we don’t want Glenn Stevens to do anything strange, we don’t want Mark Carney to do anything, we want Draghi to give us more money. The structural reforms just don’t seem to be coming through in force to take the pressure off the central bankers.

TREASURER:

Well, I don’t think any government is asking central bankers to do more heavy lifting. There seems to be some in the markets who have positions in those markets. So quite frankly, from a government perspective, and I think it is the view of almost all governments, monetary policy is a temporary solution. It’s a temporary solution to the growth needs of the world. The only way we are going to get sustained growth is through structural reform. That structural reform covers everything from freer trade, right through to workplace relations reform, but also importantly, providing stability in relation to banking reform. You’re never going to take away volatility by having public policy volatility. You’ve got to have public policy certainty and stability at a time when the rest of the world is quite volatile.

STEVE SEDGWICK:

And is that where the big crisis is, coming to this meeting, people concerned about the public policy opacity from the Chinese?

TREASURER:

Well, I think there is a general misread of the performance of the Chinese economy and the determination of Beijing to make sure that its economy continues to grow and grow relatively strongly. There’s been, in my view, a massive overreaction to volatility on the Chinese market, which is still 35 per cent higher than it was a year ago. Now, you would ask yourself, in any sane situation, if the Chinese economy’s been coming off a bit, why has the Chinese stock market grown by 35 to 40 per cent? Now these are the basics and the fundamentals that investors need to look at. And they’re the basics and fundamentals that the people reporting in China need to look at.

STEVE SEDGWICK:

Sure, but the Chinese government themselves, they were the ones who pushed the button on a whole host of actions, a whole host of seemingly panicky action, because of the stock market. It was just the stock market, not the economy. Why did they do that? Why have they got the Japanese, why have they got the Americans, so worried about it?

TREASURER:

Well, I think in relation to the Chinese stock market, it is a very small part of their economy, unlike the United States or Europe or Australia, where the stock market represents a much larger part of the economy. Secondly, they’re learning how to be more engaged in capitalist markets. We sort of expect, or there is a general expectation, that China will move from having been a closed economy to a fully open, transparent economy in just a few years. And that’s a ridiculous expectation by western countries, having noted, that China has come a very long way in a short period of time. They continue to deregulate their currency, they continue to deregulate their economy, but also importantly, they are learning how to manage volatility in their own economy, something that they haven’t been familiar with.

STEVE SEDGWICK:

Joe, you’re talking about the stock market but it is also about the economy. You can see that. You see that in Western Australia, you see what it’s doing to your federal Budget, you see what it’s doing to your exports as well. It’s really taking a toll on Australia as well. It’s not just about the stock market, is it? This is a real economic slowdown. There is a danger of an overshoot on the downside, compared with expectations.

TREASURER:

Well, this is again the danger of misinformation. Last month I just got a report, we had record iron ore go through the Port Hedland port, our biggest ever. Now, our volumes of iron ore exports to China are the highest level ever. And they’re going to continue to grow in volume. Prices have come down, yes, that’s quite true. But they seem to have stabilised around $50 US Dollars. In particular, when you look at China, you’re starting to see their own monetary policy working, we’re getting good information that property markets in certain cities are starting to pick up again in China. But when you see the volatility in Chinese equity markets, Chinese investors are going to look for other opportunities around the world. They’re most familiar with real estate. They’ll start to move more into real estate in major capital cities like Toronto, Vancouver, Sydney, Melbourne…

STEVE SEDGWICK:

They’re already there Joe.

TREASURER:

Well I suspect they’re going to keep coming. And in our case, when they come they can only buy new properties, which means there is a construction boom as well in the property market, which has helped to offset some of the loss of jobs in mining and resource construction.

Well, that’s why that if it goes into new real estate rather than existing real estate, it’s creating jobs. It is about managing the transitions in all of our economies, the Chinese economy is transitioning from an export oriented big manufacturing economy and they’re trying to drive domestic consumption. I understand that, but they’re doing it at the best speed they can. And in relation to other countries around the world, I think we’ve just got to be a bit mature and assess the fundamentals, rather than just react to the rhetoric.

STEVE SEDGWICK:

And you don’t have any concerns, that others do have, and I’m hearing it not just in the market, I’m hearing it from policy makers as well - concerns about deflation, concerns about the Chinese getting themselves out of this mess by exporting deflation globally?

TREASURER:

If you’ve got the United States now at full employment, you’re going to start to see some wage growth in the United States. You’ll start to see the empowerment of the great American consumer. That’s good for the world. I mean, there’s so much liquidity around in the world at the moment. I’m not worried about deflation. In the longer term there is a threat of inflation. But that’s in the longer term. At the moment we’ve just got to carefully manage the transition, and not be spooked by what is going to be a predictable set of events. The fact that sooner or later the US Federal Reserve is going to increase interest rates, it’s the most widely flagged change in policy I have ever seen, and sooner or later, you’re going to start to see central banks around the world increase interest rates. The test of the markets will be whether they see that as a good thing, as they should because it indicates the world economy is coming back, or whether they’re just going to continue to look for good news or pessimism, which is what they seem to want.

STEVE SEDGWICK:

Yeah, let’s talk briefly about that US rate hike as well. As you say, the most widely flagged rate hike in the history of rate hikes, and yet the market is having such wobbles about it, such tantrums, such a panic about it. Does that [inaudible] a greater concern, the lack of confidence globally that they can worry so much about something that’s been so well flagged?

TREASURER:

Well I think the challenge is, when you have so much liquidity around the world, people are looking for yield, and it’s been comforting to go into the equities markets, they’re familiar with that investment, and they’ve got yield out of the equities markets. Now that they’re going to have to start to look more broadly for yield - and there is going to be an element of risk in that, but having said that, I’m still more confident and positive about the world economy, and particularly about the engine room for growth coming out of Asia. We have an $8 trillion shortfall in infrastructure in Asia over the next ten years. From an Australian perspective, that’s more iron ore, that’s more coal, that’s uranium, that’s more gas, and then with the emergence of the massive middle class in Asia, they want our beef, they want our wheat, they want our education, our healthcare, our financial services. I see great opportunities.

STEVE SEDGWICK:

What about short term for Australia? Chris Bowen said you’re in a parallel universe, I think, in terms of your expectations for the Australian economy, highlighting deficits and debt levels as well. I mean, how do you respond to that?

TREASURER:

Well, the deficits are coming down and we’re on a credible trajectory back to surplus. If we moved any faster it would hurt the Australian economy. But bear in mind, I mean, when Chris Bowen was Treasurer iron ore prices were $130 a tonne. I can only wish - now they’re $50 a tonne. I don’t control that. But what we do influence is the transition in the economy. 70 per cent of the Australian economy is services but it’s only 17 per cent of our exports. In the last 12 months we’ve seen an increase in the services sector by 7.3 per cent. A great story. We are going to further benefit massively from the fall in the Australian dollar. We’ve been dealing with an Australian dollar that was originally, a few years ago at parity with the US, now it’s around 70 cents. It gives our exporters a chance that they haven’t had for years.

STEVE SEDGWICK:

Well the exporters aren’t responding. The latest GDP data, 0.2 of one per cent, really disappointing to you, really disappointing to everyone in the country…

TREASURER:

But in fact, mining exports came off, but you’ve seen services exports increase. Services is 80 per cent of the jobs in Australia, 70 per cent of the economy. So now, we have a huge opportunity. We can see it in tourism numbers, a million Chinese are coming this year to Australia, and they’re actually higher yield than they were 12 months ago, or two years ago. You’re starting to see an increase in education exports, and our manufacturers that have been burdened by a high Australian dollar for so long are now starting to see great export opportunities. Free trade agreements with China, Korea and Japan are game changers for the Australian economy.

STEVE SEDGWICK:

And just one more, on monetary policy as well, you don’t think the Australian economy needs a bit more support from the RBA, from Glenn Stevens. As the IMF has been talking about more support needed from our bank, more support needed from Draghi, don’t raise rates in the US and be careful of the Chinese slowdown. But Australia doesn’t need more monetary support?

TREASURER:

Well, in Australia you’ve got to understand that the transmission rate from an action by the Reserve Bank to the market is much faster than most other economies in the world. So there’s already quite a bit of liquidity in the Australian marketplace. A moment ago you were talking about higher property prices, reducing interest rates isn’t going to help there. But I would say to you, what we’ve got to do is continue to get the confidence up. Our tax cuts for small business are delivering confidence for small business. We’ve also got the biggest infrastructure roll out in Australian history, by a considerable margin, which is really going to start kicking in. There are 73 registered cranes in Sydney’s CBD alone, the business district, 163 in the kilometre around it. So we have momentum in the Australian economy. It’s patchy in parts, I accept that, but this massive transition from mining and resources construction to a broader based growth in Australia is well underway, and we’re managing it carefully.

Whilst there are divided opinions in the room about whether the United States Federal Reserve should increase interest rates, I think the danger for the United States Federal Reserve now is that if they procrastinate, if they don’t make a decision to increase interest rates, then that could be more damaging and stir more volatility on international capital markets than if they actually did move. So, I think it is time for the United States Federal Reserve to move on interest rates, to remove the uncertainty, because even if they do increase interest rates they’ll move from an ultra-accommodative monetary policy setting to an extremely accommodative monetary policy setting.

LOUISE YAXLEY:

The other key focus of this meeting has been the state of the Chinese economy. You’ve had a meeting with your Chinese counterpart, what’s emerged from that?

TREASURER:

The Chinese leadership at the G20 was more open and more transparent than they’ve ever been and I think that was warmly welcomed by the rest of the member nations. I think it’s clear that the Chinese understand that when there was significant volatility in their markets, direct government intervention at times caused more harm than provided help and support to the market. They’re still learning how to run a capitalist market. I think there is a great deal of misinformation around about the Chinese economy at the moment. For example, over the last two months we’ve seen more iron ore go through the Port Hedland port than we’ve ever seen. So the volumes of iron ore exports to China are rising. Whilst they have oversupply of steel in China, they are going through some restructuring of their economy and we should support them in that process. As the starting point, get on with the free trade agreement with China, and I have absolutely no doubt that if the Labor Party is successful in trying to undermine the free trade agreement with China, it will take a decade for the Chinese to come back to the table…

LOUISE YAXLEY:

What was specifically said in your meeting with your Chinese counterpart about the free trade deal?

TREASURER:

Well, we recognise how important it is to both countries…

LOUISE YAXLEY:

Yes - but what did they say about the political discussions in Australia, from unions and Labor, was that specifically mentioned?

TREASURER:

It was discussed and I pointed out the determination of the Government to proceed with an agreement that has taken a decade to negotiate and I think they were reassured; but quite obviously, they’re confused about the approach of the Labor Party which previously had supported free trade agreements, but now seem to be reneging on that bipartisan policy approach.

LOUISE YAXLEY:

So, what did they say to demonstrate that confusion?

TREASURER:

Well, I’m not going into the exact words of the conversation, but you can be rest assured that it will be a very long time before the Chinese would ever approach Australia with a free trade agreement should the Labor Party undermine, and ultimately destroy, the free trade agreement that we’ve negotiated.

LOUISE YAXLEY:

And did they express any concern that the free trade deal might fall over?

TREASURER:

Well I informed them of the challenges presented by the Labor Party and the more militant unions in Australia and they’re fully aware of that situation…

LOUISE YAXLEY:

Did they raise it or did you?

TREASURER:

I’m saying to you, that we discussed the matters relating to the free trade agreement. I think they are very aware that the Labor Party and the unions are taking a very militant approach to this. I’m saying to you that if it is not approved by the Parliament it will take a long time before it will be negotiated again.

LOUISE YAXLEY:

Finally Mr Hockey, there’s been more leaks, the latest is story in the Sunday papers that the Foreign Minister, Julie Bishop, had a conversation late last year with Tony Abbott about removing you as Treasurer. What’s your response to that?

TREASURER:

That’s just gossip. That’s just gossip and I’m focused on doing the job that a Treasurer should do, which is laying down the foundations for more growth in the Australian economy and greater opportunities for Australians to get ahead and get a job.